Indonesia green lights Oz farmland purchase to solve beef shortage

Indonesia has approved a plan to buy one million hectares of Australian farmland in the country’s north in order to solve its own crippling beef supply problems.

Speaking to local media, Dahlan Iskan, the Indonesian state enterprises minister, said that the cabinet had approved the plan so that the country can breed its own cattle for beef on the land.

Indonesia is undergoing a beef shortage because of its self-sufficiency policy, which has restricted imports from Australia and other countries. This shortage had resulted in Indonesian beef prices reaching record levels over the past year.

The government has eased some of its restrictions, albeit until the end of 2013, but the Australian land option will be a more permanent solution to the beef supply issue.

Breeding in two locations

Under the plan, young cattle will be raised in Australia and taken to Indonesia to be fed until they are ready for the beef market. “Breeding cattle in Australia is cheaper, [but] feedlots in Indonesia are three times cheaper [than in Australia],” Iskan said.

The Australian cattle station would be run or governed by one of Indonesia's state-owned enterprises, such as Rajawali Nusantra Indonesia, which already has a history of selling boxed beef, according to Iskan.

The plan, once the piece of land in the northern region is decided upon, will go to Australia's Foreign Investment Review Board, which would have to rule on whether a sale could go ahead.

However, given the state of Australia’s food production economy, Australian media has been speculating that the plan will be approved.

Cattlemen's approval

The Northern Territory Cattlemen’s Association, which represents cattle producers in the region, has expressed its support for the plan, stating that they cannot argue with the move since some struggling producers may well benefit.

“I think we have to be very open-minded about foreign investment,” Luke Bowen, a spokesperson for the association, told local media. “It's been a part of the landscape… our history has shown us it's been good for northern Australia.”

The region’s cattle industry was hit hard in 2011 and 2012 when the former Labor government's suspension of live exports for a month in 2011 because of animal welfare concerns.

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